The eurozone economy grew more quickly over the 12 months through June than previously estimated, according to figures released Thursday as policy makers at the European Central Bank met to decide what to do with their program of bond purchases.
The currency area’s strength has been one of the positive surprises for the global economy this year, as it outpaced the U.S. in the first quarter and accelerated further in the three months to June.
But data released by the European Union’s statistics agency showed the pickup began earlier than previously thought. While Eurostat left its estimate of quarter-to-quarter growth for the three months to June unchanged at 0.6%, it raised its estimate of growth in the third quarter of last year to 0.5% from 0.4%.
As a result, it now estimates that the economy was 2.3% larger in the three months to June than it was in the same period a year earlier, the fastest rate of growth recorded since the first three months of 2011.
On an annualized basis, the eurozone economy expanded by 2.6% in the second quarter, an upward revision from the 2.5% rate of growth Eurostat gave as its estimate in August.
Eurostat’s revisions mean the eurozone economy has been growing even more rapidly than the ECB had expected as it entered 2017, and the central bank’s economists are expected to raise their growth forecasts for this year and next later Thursday. If they do so, it will be the third straight forecasting round in which their growth projections will have been upgraded.
The surprising strength of the eurozone’s recovery this year has fuelled speculation the ECB will start to reduce the stimulus it provides to the economy next year. In particular, ECB President Mario Draghi is to signal as soon as Thursday’s policy meeting that the bank will start winding down its EUR2.3-trillion ($2.7-trillion) stimulus program, known as quantitative easing or QE.
Eurostat’s figures were also encouraging in the detail they revealed about the forces driving the eurozone’s recovery. Investment spending rose strongly after a first-quarter dip, while exports also aided growth despite the euro’s recent strengthening against other major currencies. That will ease one worry for ECB policy makers as they look to coming years, although it can take many months for currency movements to affect flows of imports and exports.
While the outlook for growth has becoming steadily more positive over recent months, the decision facing ECB policy makers isn’t without complications. The eurozone’s annual rate of inflation remains well below the central bank’s target, and there are few concrete signs it will soon rise to that goal on a sustainable basis. The apparent weakening of the link between growth, wages and inflation is a puzzle that confronts central bankers around the world.